Annual Report 1999 - Kemira

TIKKURILA
Tikkurila’s net sales fell 1% short of the
previous year’s figure and were EUR 357
million (361 million in 1998). Sales of
decorative paints in Finland were brisker
than last year, whereas the economic crisis
in Russia still kept sales volumes
small. Worldwide sales of colorants grew
further, but this was offset by the sales
of tinting machines, which were markedly
smaller than they were a year earlier.
Operating income was EUR 23 million
(33 million in 1998), or 6% of net
sales. Operating income in the September-December
period was EUR 1.6 million,
compared with an operating loss of
0.8 million in the same period a year
earlier. Credit loss provisions primarily
for receivables from Russia were booked
in a total amount of EUR 3.1 million, of
which about a quarter came in the last
three-month period.
The control system of Tikkurila’s
Monicolor plant in Vantaa was renewed
and at the same time production capacity
was raised significantly. In the vicinity
of Moscow, construction work got started
on a second paint plant that Tikkurila
will operate in Russia. The target is to
start production in the first half of this
year. Deliveries by the company’s plants
in St Petersburg picked up towards the
end of the year. In Western Europe testing
of a new marketing concept was
started during the year in co-operation
with the Italian company Benetton.
A colorant plant was completed in
Singapore towards the end of the year.
In China too a unit that will manufacture
components for colour processing systems
will be built.
In line with the new strategic focus,
the Group’s objective is to promote the
growth potential of the paint business by
divesting Tikkurila CPS either entirely or
in part.
KEMIRA AGRO
Kemira Agro’s net sales declined by 2%
and were EUR 1,015 million. The volume
of sales in Western Europe was at
the previous year’s level. Overseas exports
outside Europe grew significantly,
up 35% on the previous year. On the
other hand, the plant nutrient markets in
Finland’s nearby areas in the Baltic
countries and Poland were in decline.
Prices of plant nutrients fell further,
by 5-15%, particularly within nitrogen
fertilizers in Western Europe and they
ended at an all-time low level. New capacity,
the cost advantage which Russian
nitrogen products enjoy owing to cheap
natural gas, and China’s absence as a
purchaser of nitrogen products have all
been factors keeping prices of these
products low. At present it nevertheless
appears that prices bottomed out towards
the end of the year. Owing to the
risks posed by the East European countries
and the Baltic area, credit loss provisions
were increased by total of EUR 6
million.
The fall in the prices and sales volume
of plant nutrients was reflected in
the company’s operating income, which
fell significantly and was a loss of EUR
39 million. In the September-December
period operating income was EUR 37
million negative, whereas a year earlier
it was EUR 19 million negative. Operating
income in the last four months of the
year includes a total of EUR 23 million
of non-recurring costs that are mainly
connected with the company’s structural
change.
In line with the Group’s strategic
policy, Kemira Agro will focus on speciality
fertilizers and withdraw from the nitrogen
fertilizer business either in part or
totally. In anticipation of this change, the
company’s organization was divided into
two parts in January 2000: the speciality
fertilizer business and the nitrogen fertilizer
business.
NPK fertilizer production was wound
up at Pernis in the Netherlands and
plans call for also closing the phosphoric
acid, sulphuric acid and MAP/DAP phosphorus
fertilizer plants in the summer of
this year. Kemira Agro booked a total of
EUR 39 million of non-recurring costs for
the past financial year, the bulk of which
was related to the arrangements at
Pernis.
In accordance with the memorandum
of intent that was signed in the previous
year, Kemira Agro established a
joint venture that will manufacture potassium
nitrate, which is a speciality fertilizer,
and dicalcium phosphate, a raw
material used in feeds, in Jordan. The
capital project, which is to be completed
in 2002, is based on local raw materials
and Kemira-developed cost-effective
technology.
In Italy, Kemira Agro acquired a 50%
interest in Biolchim S.p.A, which markets
horticultural fertilizers. A joint venture
that will manufacture urea phosphate
was established in the United Arab
Emirates. The new company will build a
new plant in Dubai with the objective of
starting production by the end of 2000.
The joint ventures in Dubai, Jordan
and Italy will enable Kemira Agro to expand
its operations, according to its specialization
strategy, in the irrigation fertilizer
markets in the Mediterranean countries
as well as in the Middle East and
NET SALES BY REGION
OPERATING INCOME AND RESULT
RETURN ON CAPITAL
Asia
7 %
Other
2 %
%
12
Operating income
Income before taxes
Operating margin, %
EUR
million
300
Return on equity, %
Return on capital invested, %
%
14
Americas
13 % Finland
18 %
10
8
250
200
12
10
6
150
8
6
4
100
4
Other
Europe
8 %
Other EU
52 %
2
0
95 96 97 98 99
50
0
95 96 97 98 99
2
0
9